Wednesday, 6 March 2013

Operation successful, patient dies

We’ve now settled into Sequester World with automatic cuts in government spending taking place without anyone’s direct action, and while blame can be dispensed as one’s wishes according to party or ideological loyalty, another possibility is that our rulers have achieved exactly what they wanted, including both the nutcake ravers and the coolly reasonable guys based in the White House. Maybe this is where they wanted to be all along, presiding over a crippled state. After all, the Dow Jones just hit an all-time record, so things are perking along just fine—if you own stock.

The Europeans led the way with their completely failed austerity program in response to the imbalance in state spending caused, in turn, by the recession. It makes no sense at all as expert commentators have repeated in every key as the cutbacks merely deepen the economic slump and push the countries further into debt (Greece first, Ireland, Portugal, now Spain, now Italy, and who knows which will be next). But it is an excellent way to smash the social safety net that Europe devised as a counterbalance to the now disappeared socialisms of the east.

Here at home, we have the Obama version of austerity, which is peddled to us as deficit reduction and which is assumed to be an urgent matter largely because the Republicans have said it is. The economic machine is revving up, and production is increasing, so who cares if it is occurring in China or the Philippines rather than Kentucky or Illinois? Has there ever been such America-firster jingoism unleashed on us and the world while at the same time less concern about the well-being of actual American? Our senators spend whole days raging about dangers to Israel or the consulate burned down in Libya, but they could care less about the destruction of Detroit.

Now that everyone is just sitting back doing nothing about the automatic spending cuts, we have become accustomed to the idea that there is no money for anything and won’t be for pretty much ever. A report issued yesterday here in New York described the city’s worst crisis of homelessness in history, and one can see from the proliferation of panhandlers that the ranks of the marginalized are bursting. But Obama is not blamed for having given away huge negotiating chips (like the Bush tax cuts, now made permanent) and paving the way for the loonies to make things worse.

Yves Smith warns at Naked Capitalism that the stratospheric Dow should not lull anyone to sleep:

The Fed has been trying to reflate asset values to goose the real economy. What it has done instead is goose the incomes of the top 1% while everyone else is on the whole worse off. But the central bank is suffering from a very bad case of “if the only tool you have is a hammer, every problem looks like a nail” syndrome. It’s unwilling or unable to admit that its program is working only for a very few.

She goes on to argue that the U.S. economy is suffering from a number of deep, structural weaknesses and that policymakers’ provision of Amazonic rivers of cash will do nothing to resolve them. So it’s possible the top guys really haven’t a clue, but then again maybe they know exactly what they’re doing—they just hope we don’t figure it out.